This article is an extract from the 5th edition of Government Procurement.
The Inspector General of the City of Montreal has the mandate to monitor the contracting processes of the City of Montreal. The case studies below offer recent examples where procurement-related trade treaty duties and general procurement standards were enforced through this oversight mandate.
For example, in its January 2019 report entitled Recommendation Report Regarding the Expansion and Renovation of the Pierrefonds Library (Call for Tenders 5887), Montreal’s Inspector General determined that a general contractor arranged to have its subcontractors reduce the fees they charged for change orders but passed through the full costs of the work to the municipality and kept the difference. The report dealt with a contract for the renovation of a municipal library. The Inspector General concluded that this scheme resulted in the subcontractors increasing the cost of the work that they charged to the municipality as compensation for being required to kickback a portion of their payments to the general contractor. The Inspector General determined that the general contractor failed to fulfil its duty to act in the best interest of the municipality and that its change order scheme put it in a conflict of interest with the municipality. The Inspector General found that the scheme constituted a fraudulent practice under the municipal bylaw and concluded that the general contractor should be barred from future municipal work for a period of five years.
Further, in its February 2019 report entitled Recommendation Report Concerning the Contracting Process for the New Indoor Aquatic Complex at Centre Rosemont, Montreal’s Inspector General determined that a municipal project team incorporated biased specifications into its contract requirements. The report dealt with a project for the construction of swimming pools. As the report noted, the project team initially favoured the construction of concrete swimming pools with a ceramic coating.
However, on the advice of its external consultants, the project team then adopted a modular pool design as manufactured by a specific company. While the project team planned to allow bidders to propose equivalent products, as required by the applicable regulations, the Inspector General found that on prior projects the same external consultants had developed equivalency criteria that were unattainable by other bidders who wanted to propose modular pool brands other than the named product.
As the Inspector General noted, the municipality’s legal framework required the development of specifications based on performance or functional requirements rather than being based on specific characteristics. Further, the Inspector General noted that branding was only permitted when it was not possible to use neutral specifications, and that the municipality was required to allow bidders to make equivalency request when branding was used. The Inspector General ordered that the project team comply with its open competition duties and noted that greater oversight was required to better ensure a strict and impartial equivalency process.
Similarly, in its September 2020 report entitled Recommendation Report on Contract Management Related to Generator Set Calls for Tenders at the Office municipal d’habitation de Montréal, Montreal’s Inspector General determined that there was collaboration between the engineers retained by the municipality to design specifications for building generators for public housing buildings and the distributors of the required products. The Inspector General found that the activities went beyond general market research and resulted in the distributors influencing the final tender call specifications. The report raised concerns over the biasing of the specifications and the failure of the engineers to meet their contractual duties as independent consultants to the municipality in drafting specifications based on neutral performance or functional requirements. The report directed the municipality to adopt remedial measures including amendments to the municipality’s professional services contracts to include express provisions confirming a consultant’s legal obligation to draft neutral specifications, as well as amendments to the municipality’s tendering documents to expressly prohibit any person involved in preparing tendering documents from bidding on any resulting contract opportunity.
Further, in its June 2021 report entitled Report on the various contracts awarded to 11073192 Canada Inc. and the involvement in the award and performance of these contracts of a person ineligible for public contracts, Montreal’s Inspector General determined that an individual who was previously barred from bidding on or performing contracts for the municipality was able to circumvent the debarment rules and work on three separate contracts through a fronting company. The Inspector General found that the officers of the fronting company knowing allowed the barred individual to work on the contracts and tried to conceal this fact from its investigation. The Inspector General rescinded the three contract awards due to this breach of the debarment rules.
Similarly, in its June 2022 report entitled Report on Contract Award and Performance Related to Calls for Tenders 16-15062, 18-16618 and 21-18750, Montreal’s Inspector General found that a company that bid on and was awarded two municipal snow-hauling contracts allowed the awarded work to be performed by a person that was barred by the municipality. The Inspector General found that the parties in question knowingly entered into a fronting agreement and used a subcontracting company to enable the arrangement and circumvent the municipal debarment rules. The Inspector General concluded that the parties in question should be barred from any future municipal contract work for a period of five years.
Further, in its January 2022 report entitled Recommendations Regarding Call for Tenders 17- 6146 Involving the Acquisition of a Cloud Solution by Ville de Montréal, Montreal’s Inspector General found that the City of Montreal improperly awarded a $16 million cloud services contract to a non-compliant bidder. The report concluded that the winning bidder, Onix Networking Canada Inc., “should have been found non-compliant, since the company’s bid contained major irregularities on key elements of the call for tenders” and that “the bid assessment was not consistent with respect to all the bidders for a technical compliance requirement.”
More specifically, the report found that the solicitation called for a four-year service period, along with three additional two-year extension options, but that the winning bidder “added a change to the tender documents with its bid by not committing to the option years”. The Inspector General found that this constituted “a major irregularity and a unilateral change to the tender documents that resulted in Onix’s price being indeterminable for the three renewal options.”
The report also found that the selected solution failed to meet one of the technical compliance requirements, which “should have excluded Onix’s bid from the tendering process.” As the report detailed, the requirement in question called for a solution that would deny user access to the system after a set number of access attempts: However, during the evaluation process, the municipality’s evaluators discovered that the proposed solution did not include this function.
The Inspector General determined that the evaluators failed to disqualify the bidder for this technical non-compliance. The Inspector General also found that the municipality treated the competing bidders inconsistently when it evaluated the browser compatibility of the competing solutions. In fact, the Inspector General found that the municipality improperly relied on its prior history using one of the solutions, rather than on an actual assessment of that solution’s compatibility with the stated requirement, when conducting its evaluation.
While the Inspector General found no evidence of favouritism, the investigation “revealed breaches of the regulatory framework during the assessment of Onix’s bid with respect to the price of its bid for the option years of the contract, the assessment of the technical compliance requirements, and the consistent assessment of the bids.” The Inspector General therefore concluded that the improperly awarded contract should be terminated. As this case illustrates, public institutions should be careful to properly assess bid compliance to avoid unlawful awards to non-compliant bidders.
In its February 2022 report entitled Recommendations to Société de transport de Montréal regarding contract management of the Bellechasse Transit Centre construction project, Montreal’s Inspector General found that the Société de transport de Montréal (“STM”) engaged in bid-shopping and improper sole-sourcing in relation to a transit centre construction project. The case involved a tendering process where the agency received over-budget bids, extended the bid irrevocability period while it negotiated a direct award for the work with a subcontractor to an existing construction management agreement, and then cancelled the original tendering process. The Inspector General found that STM used information from the bids to negotiate price reductions with the subcontractor.
As the Inspector General further detailed, the original bids significantly exceeded the internal budget estimates for the work and STM was already considering cancelling its tendering process before it extended the bid irrevocability period and entered into parallel negotiations.
The Inspector General determined that STM acted unfairly in asking bidders to extend their bid irrevocability periods while it negotiated to award part of that work to a different subcontractor. The Inspector General also found that the clause in STM’s existing construction management contract, which allowed it to direct the work to the subcontractor of its construction management firm, breached the open tendering rules.
The Inspector General noted that if STM wanted to direct work to its construction management firm or to that firm’s subcontractors, that work should have been incorporated, with applicable pricing, into the originally awarded construction management contract, rather than being left open-ended as a discretionary direct award option. As this case study illustrates, public institutions should tread with caution prior to cancelling a tendering process due to budgetary constraints since the subsequent steps they take to award that work to other contractors remains subject to after-the-fact scrutiny and legal challenge. Further, those institutions should avoid sole-sourcing work based on open-ended discretionary clauses in their contracts since this practice may not comply with applicable open procurement rules.
Finally, in its June 2023 report entitled Report on the Rehabilitation of the Roussin Centre (Calls for Tenders IMM.SP20-05, IMM22-01 and IMM22-08), Montreal’s Inspector General found that two municipal tender calls for a community centre upgrade project included biased specifications and that those tender calls did not include a required clause allowing potential bidders to submit equivalency requests during the pre-bid tender posting period. As the Inspector General noted, the applicable legal standards required the municipality to prepare specifications that were described in terms of neutral performance or functional requirements rather than descriptive characteristics and, if that was not possible, required that bidders be permitted to propose equivalencies.
However, the Inspector General found no evidence that the consultant retained by the municipality to draft the requirements had attempted to prepare neutral specifications before adopting specific brands and models into those specifications. The Inspector General concluded that the consulting contract in question should be rescinded, and that the municipality should develop a plan to better ensure that future specifications are prepared in a manner that is compliant with applicable neutrality standards. The Inspector General also prescribed mandatory training for all municipal employees involved in the design and preparation of tender documents and instructed that those employees responsible for managing external technical consultants advise those consultants of applicable neutrality standards at the beginning of each project.
As these case studies illustrate, the mandate of Montreal’s Inspector General empowers that office to regulate compliance with trade treaty standards and other applicable public procurement rules. Public institutions that fall within that mandate face heightened scrutiny when it comes to complying with their procurement obligations.
